Google, CCI & India’s App Economy


The ripple effects of the CCI's directives to Google this month will be felt across the Indian app economy, which has been the fastest growing on the planet for a number of years

Chances are you reading this on an Android device (like over 95% of Indian users), and two major developments involving Google and CCI this week are likely to change how you use your smartphone and the Google Play Store, the primary app storefront on Android.

As the Competition Commission of India slapped a INR 2274 Cr fine on Google over two separate instances of anticompetitive practices, the search and tech giant finds itself on the backfoot in one of its largest markets — from the POV of Android, YouTube and Google Search.

The first larger fine of INR 1,338 Cr was in relation to pre-installing Google-developed apps on Android phones, while the second INR 936 Cr fine was for Google abusing its dominant position with respect to payment policies and commissions through the Google Play Store.

While the amount itself is not that large, the ripple effects will be felt across the Indian app economy, which has been the fastest growing on the planet for a number of years.

Our analysis of the situation follows after these other top stories of the week:

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CCI Cracks The Whip On Google

As hinted above, Google would probably not be deeply pained by the penalty. Alphabet, Google India’s US-based parent entity, reported quarterly revenue of $69.1 Bn (in a slow quarter at that) this week. The fine ($300 Mn) is a drop in the bucket in that context.

But the real problem is that Google’s stronghold on some of the key Android user touch points will loosen. It also allows developers to get a bigger share of the user revenue, thus improving the overall sustainability of the app ecosystem, particularly for independent developers.

  • In the first case, the CCI has directed Google to not force OEMs to preinstall its proprietary apps or decide their placement
  • The second case is related to payments for app purchases, and the CCI has directed Google to not restrict app developers from using third-party billing or payment services

Google was also told to share access to all data generated within an app related to transactions and in-app purchases to the concerned app developer. Developers had alleged that Google was using this data to improve its own apps at the expense of the competition, particularly its Google Pay UPI app and YouTube.

Read our complete coverage here

Fuel For App Economy

But now that app developers — particularly The Alliance of Digital India Foundation (ADIF), which has been pushing for more stringent regulations against Google — have these two victories to their name, the question is will this actually propel India’s app economy.

Google claimed that Indian apps and games saw a 200% increase in active monthly users and an 80% increase in consumer spends in 2021, compared to 2019. The time spent in apps also grew by 150% in the same period. India had the second-highest app downloads in the world, with more than 27 Bn downloads in 2021.

The CCI order is a major boost for the already burgeoning app economy of India, as it will open up the possibility of paying for apps and in-app purchases through Paytm, PhonePe, Amazon Pay and a host of other UPI apps, besides Google Pay itself, instead of being restricted to the Google Play Store billing. Incidentally, Google Pay has a 33.7% market share in UPI transactions till August, the second highest after PhonePe.

App developers don’t have to pay the 30% commission that Google typically charges for Play Billing, thus improving their revenue margins.

Besides this, developers that offer annual or multi-year subscription-based products could potentially avail of BNPL offers to reduce the price of sign-ups for customers, especially those who do not have a credit card.

Alternative app stores such as Indus OS’s App Bazaar were blocked from the Google Play Store, which will soon change with the ruling. IndusOS cofounder and CEO Rakesh Deshmukh believes that now indigenous app stores can reach users directly. The CCI ruling has boosted India’s app ecosystem as a whole as it improves the state of competition, he said in an interview this week.

More Clouds Over Google 

While these two fines will come as a relief to many Indian app developers and startups that have long wanted Google to loosen its policies, there could be more bad news to follow for Google.

It is facing antitrust investigations for alleged abuse of its dominant position in the news aggregation space through Google News, the digital payments market through Google Pay, and there have been a number of complaints against Google Search also preferring to show its own services above rivals in results.

Being Google’s largest market in terms of the number of users, India continues to be an area of focus for the tech major.

Besides this, there were concerns raised about Google charging a commission from other app makers for in-app purchases, but waiving off this fee for its own YouTube app. It remains to be seen whether separate challenges will be launched in relation to this particular issue, which had been alleged by ShareChat in its submissions to the CCI in these cases.

While the CCI has now reined in Google to some extent, Facebook (Meta) and Twitter have been questioned over various issues including moderation of content, compliance with IT rules, privacy policies and more. Amazon India’s deep discounting behaviour and preference for specific sellers has also come on the CCI radar.

Will Apple Be Next? 

But when it comes to the app economy, Google’s biggest competition is definitely Apple. Apple too has faced similar challenges related to its monopolistic practices in the US and Europe.

For instance, Apple has rejected Spotify’s updated app thrice because it wanted all in-app purchases of audiobooks to be routed through the native Apple billing system, which has a 30% commission.

Apple has claimed that Spotify cannot explicitly redirect users to a platform outside the App Store to buy audiobooks or other content. That is similar to the Google policy that CCI has come down hard on by directing Google to allow app developers to steer users away from the Play Store for payments.

Since May this year, Apple has refused to accept credit cards for payments for in-app purchases, forcing users to use either UPI or netbanking for such transactions. Besides this, users do not have the option to use any other payments service besides App Store billing.

In fact, Apple has imposed a 30% fee even on posts promoted through social media apps downloaded through the App Store. This is a major contentious move and one that could see the CCI being dragged into yet another app economy fracas.

But the problem of course is that Apple iOS market share in India is negligible compared to Android. While the latter is installed on over 95% of all smartphones, only 3.93%, as per a report in May.

Indeed the ADIF had also included Apple in its objections to the CCI. “Both the gatekeepers of the app economy have been known to rig the game in their favour by indulging in abusive practices and abusing their dominant position. There is an urgent need to rein them in,” ADIF’s former executive director Sijo Kuruvilla George said in May.

Will the CCI come after Apple next, now that Google has been brought to task?

Startup Funding, Tech Stocks & More

  • Startup Funding This Week: Indian startups raised $314 Mn this week, but over just 12 deals, which highlights the slowdown in startup funding

  • Delhivery Bleeds: Brokerage Kotak has lowered its fair value for Delhivery, after the stock hit new lows in the past week, while also advising investors to add the stock to their portfolio seeing a long-term upside
  • Nykaa’s Bleak Diwali: The beauty marketplace and house of brands saw its share price hit INR 1,110.6 a day after Diwali, reaching below its IPO issue price 
  • GoNuts Shuts Shop: Mumbai-based GoNuts, which offered engagement services for celebrities and fans, has become the latest startup to shut its doors in 2022. Here’s the story
  • Unacademy’s Mega Losses: Fellow edtech giant Unacademy is in rough position too having reported a loss of INR 2,848 Cr in FY22 as employee costs shot up during its expansion spree in 2021
  • Restaurants Walk Out Of Swiggy: High-end cafes and restaurants in the Delhi-NCR region have delisted themselves from Swiggy Dineout over concerns of deep discounting and predatory offers
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